What best supports a total economic-life estimate?
Correct Answer
B) Relevant market evidence and life data, evaluated for the subject
Support economic life with relevant market evidence and appropriate published information evaluated for the property and assignment. A component warranty, loan maturity or physical durability alone is not the economic contribution period. A published table is evidence to assess, not a universal mandatory life.
Why This Is the Correct Answer
Option B is correct because economic life is the period the improvement contributes to total property value, so it must be supported by relevant market evidence and appropriate life data evaluated for the subject property and assignment. Published tables are evidence to weigh, not a universal mandatory life.
Why the Other Options Are Wrong
Option A: The roof warranty alone, treated as the entire building’s life
Option A treats a roof warranty as the whole building's life. A warranty covers one component and reflects a manufacturer's commitment, not the period the entire improvement contributes value.
Option C: The remaining term of the mortgage loan on the property
Option C uses the remaining mortgage term, which is a financing feature set by the loan. Loan maturity does not measure how long the improvement contributes to value.
Option D: Physical durability alone, without any supporting economic evidence
Option D relies on physical durability alone, without economic evidence. Economic life is usually shorter than physical life because value contribution can end before a structure wears out.
Economic life equals value life
Economic life ends when the building stops adding value, not when it falls down or the loan is paid.
How to use: Use this to rule out warranty, loan and durability answers on life questions.
Exam Tip
Choose the answer that ties economic life to supported market evidence for the subject rather than to a single document or physical feature.
Common Mistakes to Avoid
- -Using a component warranty as the building's life
- -Equating economic life with physical life
- -Using the mortgage term as the economic life
Concept Deep Dive
Analysis
This question tests what economic life means and how it is supported. Economic life is the period during which improvements contribute to property value, which is usually shorter than physical life. It should be supported by relevant market evidence and life data evaluated for the subject.
Background Knowledge
Economic life is the period during which an improvement contributes to the value of the whole property. It is usually less than physical life, and it is estimated from market evidence such as sales and life studies of similar properties.
Real-World Application
An appraiser estimating economic life for an older house reviews sales of similar homes and published life data. The appraiser concludes on a life that reflects when such houses stop contributing value in that market, not the length of the owner's loan.
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Direct and indirect costs total $520,000 and explicitly exclude entrepreneurial incentive. Add a supported 10% of that stated base once. Land is excluded. What improvement cost new results?
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